Taiwan`s service sector seems to have reversed trend and is in decline as a share of the overall economy. According to a recent survey by the Directorate General of Budget, Accounting and Statistics (DGBAS), the contribution of services fell five points from 2001 to 2006, to 35.69%, while the share of industry rose by about the same amount, to 64.31%.
DGBAS conducts the economic census every five years, and previous censuses confirmed the usual trend of declining industry and rising services. The share of the industrial sector dropped from 76.85% in 1986 to 63.57% in 1996, while that of the service sector jumped from 23.15% to 36.43% over the same period.
DGBAS attributes the upturn in the industrial sector to a lessening of the effects of the outward migration of manufacturing industries, as a result of which the value of industrial production soared to NT$15.6 trillion in 2006, 60% more than the 2001 level. This growth was due mainly to a boom in the iron and steel, semiconductor, and optoelectronics industries, according to the DGBAS.
Over the same five-year period, the production value of the service sector advanced only 29.8% to NT$8.6 trillion. Production in the banking and insurance industries grew only 22.44%, compared with an increase of 69.6% from 1996 to 2001.
In addition, weakness in the domestic market kept growth in the wholesale and retail businesses from 2001 to 2006 to only 36.53%.
DGBAS reported that during the 2001-2006 period the outward migration of manufacturers slowed in comparison with1996-2001, when the number of traditional manufacturers fell by 13,759 and their employment shrank by 11.1%.
During the five years to 2006, the production value of traditional manufacturing industries in Taiwan leapt 63.7% as the number of companies and scale of employment in those industries rose 5.6% and 4.6%, respectively.
The most recent census also shows that the average annual compensation of local laborers reached NT$539,000 in 2006, an improvement of only 7.1% from 2001. During the previous five years, compensation advanced 15.3%.
In addition to keeping pay hikes low, local employers have increasingly resorted to filling their manpower needs through temporary help supply (THS) firms. The number of THS workers hired reached an average of 120,000 monthly in 2006, with 39,000 joining the manufacturing sector alone. Other major users of THS services were medical and health care services and social-work services.
In addition, the census pointed up the prevalence of triangular trade in the manufacturing and wholesale/retail sectors. Just over a quarter of the manufacturing sector`s revenue came from triangular trade in 2006, with manufacturers of electronic components, computers, electronics products, and optical products taking in 90% of the manufacturing industry`s total triangle-trade revenue. These figures underscore just how heavily Taiwan relies on overseas production bases.
Results of Past Five Economic Censuses
Unit: %
Year | Growth of worker compensation | Share of industry in overall production value | Share of services in overall production value |
1986 | -- | 76.85 | 23.15 |
1991 | 71.7 | 69.49 | 30.51 |
1996 | 51.4 | 63.57 | 36.43 |
2001 | 15.3 | 59.38 | 40.62 |
2006 | 7.1 | 64.31 | 35.69 |
Source: Directorate General of Budget, Accounting and Statistics, Executive Yuan
(by Philip Liu)
